Brown v. Armstrong

• Decision Date: 25 November 1991
• Docket Number: No. 90-2721,90-2721
• Citation: 949 F.2d 1007
• Parties: Walter Steven BROWN; Diane Kay Brown, Appellants, v. Gary C. ARMSTRONG; Robert E. Miller; Richard W. Sharp; Joann M. Muir; Gary Ludington; Chris Beyerhelm, (Defendants Below) United States of America, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1007

949 F.2d 1007

Walter Steven BROWN; Diane Kay Brown, Appellants, v. Gary C. ARMSTRONG; Robert E. Miller; Richard W. Sharp Joann M. Muir; Gary Ludington; Chris Beyerhelm (Defendants Below) United States of America, Appellee.

No. 90-2721.

United States Court of Appeals Eighth Circuit.

Submitted May 14, 1991.

Decided Nov. 25, 1991.

Marilyn S. Jensen, Osceola, Iowa, argued, for appellants.

Richard L. Richards, Des Moines, Iowa, argued (Gene W. Shephard and Richard L. Richards, on brief), for appellee.

Before ARNOLD and LOKEN, Circuit Judges, and FLOYD R. GIBSON, Senior Circuit Judge.

LOKEN, Circuit Judge.

Plaintiffs Walter S. and Diane K. Brown appeal a district court ¹ order substituting the United States as sole defendant in their tort action against six employees of the Farmers Home Administration ("FmHA"), and dismissing the action without prejudice for failure to exhaust administrative remedies under the Federal Tort Claims Act ("FTCA"), 28 U.S.C. §§ 2671-2680. The Browns argue that the district court erred in denying their post-removal motion to remand and in substituting the United States for the individual defendants, which has the effect of foreclosing their intentional tort claims. We affirm.

I. Background

The Browns received FmHA assistance throughout the 1980s in financing their farm operations. In 1985, FmHA helped the Browns refinance an outstanding bank loan. In 1989, the agency notified the Browns it was accelerating their loan. Without filing an administrative claim with the Department of Agriculture, the Browns commenced this action, pro se, in Iowa state court against FmHA employees Gary C. Armstrong, Robert E. Miller, Richard W. Sharp, JoAnn Muir, Gary Ludington, and Chris Beyerhelm.

The complaint alleges that it is "brought in the alternative and/or in the event the Defendants ... were acting outside the scope of their office and employment ... in undertaking such actions or inactions." The "actions or inactions" alleged include improper documentation of the Browns' FmHA file, broken promises to lend money and to resolve disputes, inducing the Browns to overextend themselves, lying throughout the FmHA appeals process, attempting to put the Browns out of the farming business, and misrepresenting the value of farmland the Browns purchased from another FmHA borrower. The seven enumerated causes of action sound in tort.

The United States Attorney for the Southern District of Iowa appeared on behalf of the individual defendants and removed the case to federal court. After the Browns' motion to remand was denied, the U.S. Attorney certified that "the individual defendants ... were acting within the scope of their employment as employees of the United States of America at the time of the incidents [alleged in the complaint]," ² and moved to substitute the United States as defendant, pursuant to § 2679(d)(1), and to dismiss the complaint for failure to exhaust FTCA remedies, as required by § 2675(a).

The district court granted the government's motion and denied the Browns' motion to strike the certification. The court then dismissed the complaint with prejudice against the individual employee defendants ³ and dismissed the complaint against the United States without prejudice. The Browns appealed and obtained the pro bono services of appellate counsel, who focuses our attention upon the issues addressed below.

II. Removal

The Browns argue that the district court erred in denying their motion to remand for two reasons. First, noting that they filed for voluntary bankruptcy shortly after commencing this action, the Browns contend that removal violated the Bankruptcy Code's automatic stay of "the commencement or continuation ... of a judicial ... proceeding against the debtor." 11 U.S.C. § 362(a)(1) (1988) (emphasis added). However, as the plain language of the statute suggests, and as no less than six circuits have concluded, the Code's automatic stay does not apply to judicial proceedings such as this suit, that were initiated by the debtor. See Merchants & Farmers Bank v. Hill, 122 B.R. 539, 541 (E.D.Ark.1990), and cases cited. As the court said in Martin-Trigona v. Champion Fed. Sav. & Loan Ass'n, 892 F.2d 575, 577 (7th Cir.1989):

The fundamental purpose of bankruptcy ... is to prevent creditors from stealing a march on each other ... and the automatic stay is essential to accomplishing this purpose. There is, in contrast, no policy of preventing persons whom the bankrupt has sued from protecting their legal rights.

Second, the Browns argue that the petition for removal was ineffective because it was made prior to the U.S. Attorney's certification as to scope of employment. Had the government purported to remove under § 2679(d)(2) of the FTCA, this argument might have merit. However, the removal petition was expressly based upon 28 U.S.C. § 1442(a)(1), which generally permits removal of an action against "[a]ny officer of the United States ... for any act under color of such office." See Mesa v. California, 489 U.S. 121, 109 S.Ct. 959, 103 L.Ed.2d 99 (1989). Removal under § 1442(a)(1) does not require a § 2679(d) certification. Therefore, the Browns' motion to remand was properly denied.

III. Substitution

The Browns concede that, if their suit is properly against the United States, it must be dismissed without prejudice for failure to exhaust agency remedies. However, if the United States was improperly substituted for the FmHA employees, as the Browns contend, they would have a right to pursue their claims against the individual defendants free of the FTCA's exhaustion requirement. We conclude that the district court properly substituted the United States as sole defendant.

The district court's substitution order was based upon the Liability Reform Act, which was intended to restore ⁴ full tort immunity to all federal employees acting within the scope of their employment. The immunity is conferred by § 2679(b):

"The remedy against the United States ... for injury ... from the negligent or wrongful act of any employee of the Government while acting within the scope of his office or employment is exclusive...."

The immunity is triggered when the Attorney General or his designate (here, the U.S. Attorney) certifies that federal employees have been sued for conduct within the scope of their employment. "Upon certification ... the United States shall be substituted as the party defendant," § 2679(d)(1).

In this case, it is undisputed that the U.S. Attorney made a timely, facially proper certification. However, the Browns claim that the certification was false--that their complaint challenges conduct outside the scope of the individual defendants' FmHA employ. Indeed, their suit was expressly pleaded in the "alternative," covering only conduct by the individual defendants that in fact was outside the scope of their federal employ. In any event, argue the Browns, they were improperly deprived of their right to litigate the scope-of-employment issue because the district court treated the U.S. Attorney's certification as conclusive when it substituted the United States as defendant.

This last question, whether the Attorney General's certification is conclusive, is one of first impression for this court, but has produced conflicting decisions in other circuits. Most of the earlier cases, including two circuit decisions, held that the Attorney General's certification was non-reviewable, so that "upon certification" a district court must permit removal (if the suit began in state court) and must substitute the United States as defendant. See, e.g., Mitchell v. Carlson, 896 F.2d 128 (5th Cir.1990); Aviles v. Lutz, 887 F.2d 1046 (10th Cir.1989); Egan v. United States, 732 F.Supp. 1248 (E.D.N.Y.1990).

Though this interpretation comports with the plain language of § 2679(d)(1) ("Upon certification ... the United States shall be substituted"), more recent decisions, reflecting a change of position by the Department of Justice, have held that while the certification is conclusive for removal purposes, the district court retains authority to determine the scope-of-employment issue before substituting the United States as defendant. See Meridian Intern. Logistics, Inc. v. United States, 939 F.2d 740 (9th Cir.1991); Hamrick v. Franklin, 931 F.2d 1209 (7th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 200, 116 L.Ed.2d 159 (1991); S.J. & W. Ranch v. Lehtinen, 913 F.2d 1538 (11th Cir.1990), cert. denied, --- U.S. ----, 112 S.Ct. 62, 116 L.Ed.2d 37 (1991); Melo v. Hafer, 912 F.2d 628 (3d Cir.1990), aff'd on other grounds, --- U.S. ----, 112 S.Ct. 358, 116 L.Ed.2d 301 (1991); Nasuti v. Scannell, 906 F.2d 802 (1st Cir.1990); Arbour v. Jenkins, 903 F.2d 416 (6th Cir.1990).

Reflecting the new Department of Justice position, the government conceded at oral argument in this case that its scope-of-employment certification is judicially reviewable on the question of substitution. We accept the government's concession. Although this issue of statutory construction is not free of doubt, ⁵ we agree that the certification should be reviewable on the question of substitution. Congress has broad power to define the extent of sovereign immunity, but "official immunity comes at a great cost" to those injured by the wrongful conduct of federal officials. Westfall, 484 U.S. at 295, 108 S.Ct. at 583. Substitution of the United States as defendant will frequently end the plaintiff's case, either because FTCA administrative remedies have not been exhausted, or because, under § 2680, some or all of plaintiff's claims are simply not actionable against the United States. See Part IV infra. The same concerns do not exist with automatic removal, which changes only the forum and not the substance of the case. Thus, we hold that the district court was required to conduct at least limited judicial review of the Attorney General's scope-of-employment certification before substituting the United States as defenda...